An Economic Miracle (Post WWII)

    An “economic miracle” occurred just after the Cold War, America was thriving for a decade or so up until the 1950s. How could a war bring about economic success? That’s the miracle of it, but maybe it was less coincidence, and more about doing something right that the US wouldn’t usually do.

    What could the State have done to create economic success after war? Nothing. When the State did less regulation and interference, we had a decade of productivity. For one of the first times, the US State was preoccupied enough with other affairs, that they did not create the ratchet effect. 

     The Ratchet Effect, a concept Robert Higgs discussed in Crisis and Leviathan is predominant in most US wars, the Great Depression, and even Covid. The State is always pushing for more money. Private institutions can only get more money by appealing to the wants and needs of customers. Government taxes, it's not anchored to serving people. Government claims that after an emergency is over inflation will go back down and we will go back to normal. Instead there is a ratchet effect crank it up, and then it's a little tighter, a new normal is created and that normal is accepted because it is still a relief from the worst of the emergency.

     War is the health of the State. People feel like part of the American tradition even though their deal is way worse than what we revolted against England for because of how many times the State has racheted things up. To pursue the war effort, the government relaxed their regulations long enough for people to become productive again, which is not what usually happens, so everyone had an economic miracle for a decade.

    Economist theory was that without government intervention soldiers would come home with no jobs and we therefore needed to ramp up government control. However, after the cold war the government was for once preoccupied, so soldiers came home, got jobs, became entrepreneurs, did what was good for them and the culture around them, so America was extremely productive and thriving. This is what happens when the ratchet effect does not take place, without interference from the government, the economy and culture thrives. Which the US State claimed was an economic miracle.